Image of the article author, Michael Paciotti

Where Have the Shale Drillers Gone?



Earlier this week energy consumers witnessed a war of wills between energy consuming nations, led by the U.S., and the energy producers of OPEC+.  The oil consumer group, in response to rising oil prices (+60% since the start of 2021) and a lack of additional supply from OPEC+, recently announced a plan to release a portion of their strategic petroleum reserves.  OPEC+, in turn, stated they would meet such release with a cut in production.  All of this begs the question -- Where has domestic production gone, which had served as the swing producer several years ago and, in particular, where are the shale drillers? 

The table below shows that U.S. shale drillers are operating at a fraction of prior peak rig counts, with the peak being 1,749 rigs compared to only 472 in operation today.  However, this only tells part of the story, as the current operating rigs are producing 8.6mm barrels per day vs. peak production of 9.4mm. When we include total U.S. oil production, we see a gap of about 1.6mm barrels per day vs. the peak.  This would imply that shale is only part of the problem.

 

Shale Drillers

Important Disclosures

Integrated Capital Management, Inc. is an SEC Registered Investment Advisor. Registration does not imply any certain level of skill or training. Monthly “Market Flash” is intended solely to report on various investment views held by Integrated Capital Management. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable, but should not be assumed to be accurate or complete. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer or recommendation to purchase or sell a security.

Past performance is no guarantee of future results. Please note that investments in foreign markets are subject to special currency, political, and economic risks. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index.

Strategy performance results are net of fund expenses, gross of advisory fees and other expenses that would be incurred in the management of client accounts, such as commissions, transaction fees, and/or custodial charges, and reflect the reinvestment of dividends and capital gains. The client’s return will be reduced by the advisory fees Integrated Capital Management, Inc. charges for the management of an account. Individual account performance and investment management fees incurred by clients may vary as fees for smaller accounts are higher on a percentage basis than for larger accounts. Investment return and principal value will fluctuate, so shares, when redeemed, may be worth more or less than their original cost. For additional information regarding advisory fees, please review Integrated Capital Management, Inc.'s Form ADV Part 2A.

TICE Blended Index comprised of 32% S&P 500/8% MSCI EAFE/38% Barclays Aggregate Bond/20% Barclays Municipal Bond/2% Cash

For 1-on-1 Use with Clients Only. Not to be Distributed to Third Parties.

Real-time SEO
na